Central Government Increasing Inflation through GST

Role of Central Government in Increasing Inflation in India through GST Taxation on Common Day-to-Day Consumption Goods
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Introduction

The introduction of Goods and Services Tax (GST) in India was aimed at simplifying the tax structure and eliminating cascading effects. However, the impact of GST on common day-to-day consumption goods has been a matter of concern for the common man. This blog delves into the role of the Central Government in increasing inflation through tax application in GST on essential goods and services.

Inflation and Its Impact on the Common Man through GST

GST replaced various indirect taxes like CST, VAT, service tax, and excise, streamlining the tax system and eliminating the cascading effect of taxes. Theoretically, GST should have led to a reduction in prices of consumer goods due to lower manufacturing costs and a decrease in tax on tax. However, the reality has been mixed, especially concerning essential goods consumed by the common man.

Inflationary Pressures on Daily Household Items from Central Government

In the aftermath of GST implementation, there have been fluctuations in the prices of daily household items. While some food items are under the zero to 5 per cent tax rate and were expected to remain unaffected, other items like cosmetics, kitchen appliances, and salon services faced an increased 3% GST rate. This impacted the common man’s budget and increased the cost of living for a significant portion of the population.

Impact on Household Expenses

A survey conducted after GST implementation revealed that nearly 54 per cent of people believed that the new tax regime had enhanced daily household expenses, affecting common people in the country. Despite some rate reductions on certain items in subsequent GST council meetings, the prices of essential goods have continued to rise, leading to inflationary pressures on the common man.

Fluctuating Car Prices

GST led to varying car prices, with some models receiving a rate cut and others becoming costlier. The complex GST structure, including additional cess on cars based on engine capacity, contributed to uncertainty in car prices. This impacted the common man’s ability to afford a mode of transportation, further affecting their expenses.

Real Estate Taxation

GST brought about changes in the tax rates for the real estate sector. While ready-to-move apartments with completion certificates were kept out of the GST structure, under-construction properties saw an increase in tax rates, making them slightly expensive for buyers. This affected the common man’s prospects of buying a home and added to their financial burden.

Rising Petrol Prices

Petrol prices have been a major concern for the common man, with rates continuously increasing despite declining crude oil prices. The Petroleum Minister has expressed the need to bring petroleum under GST to control petrol and diesel prices effectively. The fluctuating prices have led to inflationary pressures on transportation and everyday expenses.

Impact on Other Services

The GST implementation also impacted other services like banking and insurance, air travel, hotels, clothes and mobile bills, leading to increased expenses for the common man. The change in tax rates on these services contributed to inflation and reduced the purchasing power of the common man.

Conclusion

The role of the Central Government in increasing inflation in India through GST taxation on common day-to-day consumption goods cannot be overlooked. While GST aimed to simplify the tax system and reduce the burden on consumers, the implementation has been marked by fluctuations in prices and inflationary pressures on essential goods and services. The complex GST structure, coupled with the fluctuating prices of petrol and diesel, has adversely affected the common man’s cost of living and purchasing power.

To address these challenges, the government must focus on rationalizing tax rates, ensuring transparency in tax administration, and mitigating the impact of GST on essential goods and services. Only through well-planned and thoughtful policy interventions can the government ensure stable prices and alleviate the burden on the common man’s everyday expenses.

Photo By: UNSPLASH

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